What is Liquid Assets?
Nexa Consultancy | Startup & Finance Glossary
Liquid Assets are assets that can be easily and quickly converted into cash with little to no loss in value. The most liquid asset is cash itself. Other examples include cash equivalents (like short-term government bonds) and marketable securities.
For Startups: Maintaining sufficient liquid assets is critical for a startup's survival. It ensures the company has the cash needed to cover its short-term obligations, such as payroll and rent. Investors closely monitor a startup's liquidity position (often measured by the Current Ratio or Quick Ratio) to assess its short-term financial health and runway.
Example: A startup's balance sheet shows it has ₹50 Lakhs in cash and ₹10 Lakhs in a highly liquid mutual fund. It has ₹60 Lakhs in liquid assets to manage its operational needs.